-> DEF: Process driven by specific or technological competencies.
- Product/ Process innovation that revolve around the physical attributes of the product.
TECHNOLOGY: “… a set of practical and theoretical knowledge, Know-how, methods, procedures, success and failure experiences and, obviously, of physical assets and machineries…” (Dosi 1982)
Dynamic:
-> The typical dynamic of technology innovation is a S-Shape curve:
- Time based evolution of a single parameter of a technology.
- Technology 🔗 level of knowledge: the more we know, the more/ faster we
can improve.
-> HP:
- Limited growth (L): every kind of technology has a limit.
- 3 Phases
- INITIATION: when the technology is not known, improves slowly
- DEVELOPMENT: smth start to be accepted by the market & development of tech is faster
- MATURITY: we are close to the limit & marginal growth start to decreasing.
- Constant innovation effort (b): as investments, resources
Possible Uses:
- To understand the development stage for a technology
- To forsee L: understand if the company has to invest in the technology or to not invest anymore.
- Drive to the technology switch: when the first technology reached its limit we’ve to switch
Examples:
-> In this example we can see the envelope curve resulting in the long period.
Limits:
-> b = f(Investments, Innovation Effort): is the innovatoin effort
-> Once reached the moon the Apollo missions didn’t had the same effort.
-> Electric vs Petrol Engine in Automotive
💡 The first model of a car with a battery was invented in 1830s, the first one hit the market in 1881.
-> With the end of the WWI was believed petrol cars were more reliable.
Innovation Markets’ Dynamics:
-> How do the three dimesion of innovation…
- Technology push VS Market pull Innovation
- Product VS Process Innovation
- Radical VS Incremental Innovation
…interact?
Case: Typewriting
-> 1866 Mr. Sholes creates the first TYPEWRITER combining existing technologies:
- Forward movement from watches
- Back movement leverage from sewing machines
- Keyboard from telegraphs
- Hammer mechanical movements from piano
-> 1873: Remington (weapon producer, looking for diversifying) buys the exclusive license
-> 1874: Remington N°1
- Hammers hit the paper inside the typerwriter body
- Only upper-case letter
- Hard to use
- 4000 units sold
-> 1878:Remington N°2:
- Upper and lower case
- 100 000 units sold
Rogers diffusion of Innovation:
-> Accroding to Rogers population can be divided in based on reaction to a new technology:
- INNOVATORS: 🔺 risks; 🔺 social status ;🔺 financial liquidity
- EARLY ADOPTERS: 🔺 social status; more discrete in adoption choices
- EARLY MAJORIY: 🔺avg social status
- LEATE MAJORITY: scepticists; 🔻financial liquidity
- LAGGARDS: aversion to change-agents; focus on tradition.
-> EX: the difference of the units sold of the first 2 Remington was given by the fact that the second one was a technology that people had become aware yet.
Dominant design:
-> DEF: architecture winning on the market
- “…Has features that competitiors & innovators must adhere if they hope to command significant market share following” (Utterback, 1994)
-> CHAR:
- Summarize innovations introduced by previous products
- Archtype fo the product both in designer & immagination
- Satisfy a larg number of people
- Reduces the number of requirements
- Imply constraints
- Freezes the socio-economic context
-> DRIVER:
- Complementary assets: distributions, brand, services, capacity
- Strategic manouvering
- Better understand of the customer needs
- Rules and laws
Network Effect:
-> Metcafe’s Law: # unique connections: n* (n-1)/2
NETWORK EXTERNALITIES: effects on a user of a product or service of other using the same compatible products or service.
- POISTIVE NE exist if the benefits are an increasing function of the number of other users.
LOCK IN EFFECT: when the cost for switching is higher than the benefit
CRITICAL MASS–BANDWAGON EFFECT: when the benefit from externalities outperforms the benefit from product usage.
Abernathy-Utterback
-> PRODUCT innovations goes through 3 phases:
| Innovation Rate | Companies | DD | |
| FLUID PHASE | 🔺 rapidly | Different companies offer different architectures of the same product | All aim to be the dominant design |
| TRANSITION PHASE | 🔻 | Offer simila product | It’s established, satisfy the market. |
| SPECIFIC PHASE | 0 | Offer same product | Standardized |
-> PROCESS innovations
- FLUID PHASE: companies don’t invest: unknown DD
- TRANSITION PHASE: once DD is defined => Companies start to invest
- SPECIFIC PHASE: companies invest less
Competition Dynamics:
Cycling:
-> Technological discontinuity follow a circle: they generate a fluid phase, the market select the dominant design and companies perform incremental innovations on it until a new technology is discovered and the cycle rebegins.
Source of Innovation:
-> Usually source of innovations are the New Entry.
-> INCUMBENTS find difficulties integrating radical innovations:
- Path dependency of marginal costs
- Uncertainty about feasibility and profits
- Over estimation of the technology potential (technology Myopia)
- Innovatoin implies change management.
Distruptive Innovations & Technology:
-> DEF DISTRUPTIVE INNOVATION: process of making expensive product and services more affordable and accessible.
- Build business model very different from those of incumbents
- Some succeed, some others no.
-> CHAR:
- Not suitable for existing arket
- 🔻 Initial performance
- Performance rapidly grow & conquer markets.
-> DEF DISTRUPTIVE TECHNOLOGY: innovation that
significantly alters the way consumers, industries or business operate
-> EX: Netflix was a distruptive innovation of blockbusters.
